Removing barriers to housing construction crucial to affordability in Calgary

By The Fraser Institute on July 8, 2016Comments Off on Removing barriers to housing construction crucial to affordability in Calgary

Calgary homes are more expensive now than when oil prices peaked before the 2008 recession

By Steve Lafleur Josef Filipowicz and Ian Herzog The Fraser Institute

VANCOUVER, B.C. July 8, 2016/ Troy Media/ – Growth in Calgary’s housing market recently slowed alongside oil prices, but today’s snapshot belies the [popup url=”http://www.housepriceindex.ca/default.aspx” height=”1000″ width=”1000″ scrollbars=”1″]significant[/popup] increases in housing prices over the past two decades. In fact, Calgary homes (houses, condos, townhouses, etc.) are more expensive now than when [popup url=”https://fred.stlouisfed.org/series/DCOILWTICO” height=”1000″ width=”1000″ scrollbars=”1″]oil prices peaked[/popup] before the 2008 recession – and the city is still growing.

Steve Lafleur

Subsequently, when the economy picks up, housing affordability will be an issue once again. To preserve Calgary’s affordability, and support healthy, sustainable growth the housing supply will need to keep pace with growing demand.

Fortunately, municipalities control many of the factors that determine housing supply growth.

A new Fraser Institute study examined how simple elements of land-use regulations – such as development approval timelines – impact housing supply. The results show what seems intuitive but is often overlooked: cities with stronger barriers to housing construction see a reduction in the growth of new housing. Indeed, long and uncertain timelines make it more difficult, and less likely, for the housing supply to respond to demand with homebuilding. In addition to driving up prices, this pushes homebuilding to suburban communities where there are often fewer barriers to construction.

Josef Filipowicz

Opposition to new building, long development approval timelines, and uncertainty tend to be especially problematic in central cities where demand is strongest. So, people who might prefer to live downtown end up commuting to Calgary from Airdrie or Cochrane. Indeed, the data suggest that if there were less red tape in Calgary and Rocky View County, these communities would have seen more growth within their borders, with less in Airdrie and Cochrane. If the City of Calgary is truly concerned about urban sprawl, providing shorter more predictable approval timelines for new developments is one way to encourage more building and affect prices.

There are local examples of cities that get the job done. In fact, Airdrie and Okotoks tend to issue building permits months [popup url=”https://www.fraserinstitute.org/sites/default/files/residential-land-use-regulation-in-ABs-calgary-edmonton-corridor.pdf” height=”1000″ width=”1000″ scrollbars=”1″]sooner[/popup] than Calgary, and these timelines are more predictable, too.

Ian Herzog

Of course, it’s true that allowing housing supply growth will inevitably change some neighbourhoods, but the benefits outweigh the costs. Besides, there’s no reason why addressing anti-growth pressures, streamlining approvals, or mitigating uncertainty in residential development must compromise good planning. The additional homebuilding that would follow can provide good jobs and keep housing costs down as the economy rebounds.

It’s important to remember that all types of housing – from dense apartments to sprawling mansions – have an impact on housing supply. While some focus on the need for subsidized housing, it’s important to remember that even cheap rental units can become unaffordable when there’s short supply. In an [popup url=”http://www.theatlantic.com/politics/archive/2015/12/san-francisco-is-confused-about-the-villain-thats-making-it-unaffordable/422091/” height=”1000″ width=”1000″ scrollbars=”1″]extreme case like San Francisco[/popup], which is notorious for its lack of new housing development, this can mean that people who would otherwise purchase new condos end up displacing low-income earners in existing rental units. This can happen in any community where housing demand outstrips supply.

The good news is that local governments, including Calgary city council, can improve affordability by encouraging a healthy supply of new homes. In fact, any discussion of housing affordability should consider ways to make land-use regulations more amenable to growth.

Steve Lafleur, Josef Filipowicz and Ian Herzog are public policy analysts with the Fraser Institute and co-authors (with Kenneth Green) of The Impact of Land-Use Regulation on Housing Supply in Canada.

The views, opinions and positions expressed by all Troy Media columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of Troy Media.

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